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Chapter 3

Retailing in Electronic Commerce:


Products and Services
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Learning Objectives
1. Describe electronic retailing (e-tailing) and its
characteristics.
2. Define and describe the primary e-tailing
business models.
3. Describe how online travel and tourism services
operate and their impact on the industry.
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Learning Objectives
4. Discuss the online employment market, including
its participants, benefits, and limitations.
5. Describe online real estate services.
6. Discuss online stock-trading services.
7. Discuss cyberbanking and online personal
finance.
8. Describe on-demand delivery by
e-grocers.
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Learning Objectives
9. Describe the delivery of digital products and
online entertainment.
10. Discuss various e-tail consumer aids, including
comparison-shopping aids.
11. Identify the critical success factors and failure
avoidance tactics for direct online marketing and
e-tailing.
12. Describe reintermediation, channel conflict, and
personalization in e-tailing.
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Internet Marketing
and Electronic Retailing
Overview of Electronic Retailing
electronic retailing (e-tailing)
Retailing conducted online, over the Internet

e-tailers
Retailers who sell over the Internet


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Internet Marketing
and Electronic Retailing
Size and Growth of the B2C Market
Reported amounts of online sales deviate
substantially based on how the numbers are derived
Annual online 2004 sales were estimated to be over $70
billion
The average online shopper spent over $350 per quarter
Forrester Research estimates that e-tailing will reach
$316 billion by 2010
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Internet Marketing
and Electronic Retailing
Computer hardware
and software
Consumer electronics
Office supplies
Sporting goods
Books and music
Toys
Health and beauty
Apparel and clothing
Jewelry
Cars
Services
Others

What Sells Well on the Internet?
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Internet Marketing
and Electronic Retailing
Characteristics of Successful E-Tailing
High brand recognition
A guarantee provided by highly reliable or well-known vendors
Digitized format
Relatively inexpensive items
Frequently purchased items
Commodities with standard specifications
Well-known packaged items that cannot be opened even in a
traditional store
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E-Retailing Business Models
Classification by Distribution Channel
1. Mail-order retailers that go online
2. Direct marketing from manufacturers
3. Pure-play e-tailers
4. Click-and-mortar retailers
5. Internet (online) malls
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E-Retailing Business Models
direct marketing
Broadly, marketing that takes place without
intermediaries between manufacturers and buyers; in
the context of this book, marketing done online between
any seller and buyer

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E-Retailing Business Models
Direct Sales by Manufacturers
Sellers can understand their markets better because
of the direct connection to consumers
Consumers gain greater information about the
products through their direct connection to the
manufacturers

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E-Retailing Business Models
virtual (pure-play) e-tailers
Firms that sell directly to consumers over the Internet
without maintaining a physical sales channel

click-and-mortar retailers
Brick-and-mortar retailers that offer a transactional Web
site from which to conduct business
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E-Retailing Business Models
brick-and-mortar retailers
Retailers who do business in the non-Internet, physical
world in traditional brick-and-mortar stores

multichannel business model
A business model where a company sells in multiple
marketing channels simultaneously (e.g., both physical
and online stores)
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E-Retailing Business Models
Retailing in Online Malls
Referring Directories
Malls with Shared Services
Representative B2C Services
Postal Services
Services and Products for Adults
Wedding Channels
Gift Registries
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Travel and Tourism Services Online
Online travel is probably the most successful
e-commerce implementation
Services provided include:
General information
Reserving and purchasing tickets, accommodations,
and entertainment
Travel tips
Electronic travel magazines
Fare comparisons
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Travel and Tourism Services Online
Benefits of Online Travel Services
Benefits to consumers
Large amount of free information available 24/7
Substantial discounts can be found
Benefits to providers
Airlines, hotels, and cruise lines are selling otherwise-
empty spaces
Direct selling saves the providers commission and its
processing
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Travel and Tourism Services Online
Limitations of Online Travel Services
Many people do not use the Internet
The amount of time and the difficulty of using virtual
travel agencies may be significant
Complex trips or those that require stopovers may not
be available online because they require specialized
knowledge and arrangements
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Travel and Tourism Services Online
Corporate Travel
To reduce corporate travel costs, companies can make
arrangements that enable employees to plan and book
their own trips using online optimization tools provided
by travel companies, such as those offered by
Rosenbluth International
Travel authorization software that checks availability of
funds and compliance with corporate guidelines is
usually provided by travel companies

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Travel and Tourism Services Online
Intelligent Agents in Travel Services
Software agents emulate the work and behavior of
human agents in executing organizational processes
like travel authorization, planning or decision making
Each agent is capable of acting autonomously,
cooperatively, or collectively to achieve the stated
goal
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Employment Placement
and the Job Market Online
The Internet Job Market
Job seekers
Employers seeking employees
Job agencies
Government agencies and institutions
The Internet is a global online portal for job
seekers
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Employment Placement
and the Job Market Online
Limitations of the Electronic Job Market
Many people do not use the Internet. This limitation is
even more serious with non-technology-oriented jobs
Security and privacy: resumes and other online
communications are usually not encrypted, so ones
job-seeking activities may not be secure
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Exhibit 3.7 Intelligent Agents Match
Resumes with Available Jobs
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Real Estate, Insurance,
and Stock Trading Online
Real Estate Applications
Advice to consumers on buying or selling a home
Commercial real estate listings
Listings of residential real estate in multiple databases
The National Association of Realtors (realtor.com) has
links to house listings in all major cities
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Real Estate, Insurance,
and Stock Trading Online
Real Estate Applications
Maps are available
Information on current mortgage rates
Mortgage brokers can pass loan applications over the
Internet and receive bids from lenders who want to
issue mortgages
Online lenders can tentatively approve loans online
Automated closing of real estate transactions
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Real Estate, Insurance,
and Stock Trading Online
Real Estate Applications
Property management companies (residential,
commercial, and industrial) are using the Internet for
many applications ranging from security to
communication with tenants
Sites for persons who want to sell their homes privately,
without using a real estate agent
Rental properties are listed
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Real Estate, Insurance,
and Stock Trading Online
Insurance Online
An increasing number of companies use the Internet to
offer standard insurance policies (auto, home, life, or
health) at a substantial discount
Third-party aggregators offer free comparisons of
available policies
Several large insurance and risk-management
companies offer comprehensive insurance contracts
online
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Exhibit 3.8 Online Electronic Stock Trading


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Real Estate, Insurance,
and Stock Trading Online
Investment Information Online
Current financial news
Municipal bond prices
Many tools are available to help investors in the bond
market
Free guru (expert) advice
Stock screening and evaluation tools

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Real Estate, Insurance,
and Stock Trading Online
Investment Information Online
Articles from the Journal of the American Association of
Individual Investors
Schwab Trader encourages consumers to practice
trading strategies
The latest on funding and pricing of IPOs
Earnings estimates
The major risk of online trading is security
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Banking and Personal Finance Online
electronic banking (e-banking)
Various banking activities conducted from home or the
road using an Internet connection; also known as
cyberbanking, virtual banking, online banking, and home
banking
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Exhibit 3.9 Online Banking Capabilities
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Banking and Personal Finance Online
Virtual Banks
Virtual banks have no physical location, but only conduct
online transactions
International and Multiple-Currency Banking
Hong Kong and Shanghai Banking Corporation
(hsbc.com.hk)
Tradecard and MasterCard for global transactions (see
tradecard.com)
Bank of America and most other major banks
Fxall.com is a multidealer foreign exchange service
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Banking and Personal Finance Online
Implementation Issues in Online Financial
Transactions
Securing financial transactions
Access to banks intranets by outsiders
Using imaging systems
Pricing online versus off-line services
Risks
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Banking and Personal Finance Online
Online Billing and Bill Paying
Automatic transfer of mortgage payments
Automatic transfer of funds to pay monthly utility
bills
Paying bills from online banking accounts
Merchant-to-customer direct billing
Using an intermediary for bill consolidation
Person-to-person direct payment
Pay bills at bank kiosks
Taxes
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On-Demand
Delivery Services and E-grocers
on-demand delivery service
Express delivery made fairly quickly after an online
order is received

e-grocer
A grocer that takes orders online and provides
deliveries on a daily or other regular schedule or within
a very short period of time

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Online Delivery of Digital Products,
Entertainment, and Media
Certain goods, (software, music, or news stories) may be
distributed in a physical form or they may be digitized and
delivered over the Internet
For sellers, the costs associated with the manufacture,
storage, and distribution of physical products can be
enormous
Inventory management also becomes a critical cost issue,
and so does delivery and distribution
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Online Delivery of Digital Products,
Entertainment, and Media
Interactive Entertainment
Web browsing
Internet gaming
Fantasy sport games
Single and multiplayer games
Adult entertainment
Card games
Participatory Web sites
Reading
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Online Delivery of Digital Products,
Entertainment, and Media
Noninteractive Entertainment
Event ticketing
Restaurants
Information retrieval
Retrieval of audio and video entertainment
Live events
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Online Purchase-Decision Aids
shopping portals
Gateways to e-storefronts and e-malls; may be
comprehensive or niche oriented
shopping robots (shopping agents or
shopbots)
Tools that scout the Web on behalf of consumers who
specify search criteria
Wireless Shopping ComparisonsEnable shoppers to
compare prices any time from anywhere, including from
any physical store
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Online Purchase-Decision Aids
Business Ratings Sites
Trust Verification Sites
Other Shopper Tools
Escrow services
Communities of consumers who offer advice and
opinions
E-wallet (or e-purse)
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Online Purchase-Decision Aids
Other Shopper Tools
Amazon.coms A9 Search Engine
Remembers information
A user can make notes about any Web page and search
them
Offers a new way to store and organize bookmarks
Recommends new sites and favorite old sites specifically for
the user to visit
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Successful Click-and-Mortar Strategies
A traditional brick-and-mortar store with a mature
Web site uses a click-and-mortar strategy to:
Speak with one voice
Leverage the multichannels
Empower the customer
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Problems with E-tailing
and Lessons Learned
Dont ignore profitability
Manage new risk exposure
Watch the cost of branding
Do not start with insufficient funds
The Web site must be effective
Keep it interesting
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Issues in E-Tailing
disintermediation
The removal of organizations or business process layers
responsible for certain intermediary steps in a given supply
chain

reintermediation
The process whereby intermediaries (either new ones or
those that had been disintermediated) take on new
intermediary roles
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Exhibit 3.12 Disintermediation and Reintermediation
in the B2C Supply Chain
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Issues in E-Tailing
cybermediation (electronic intermediation)
The use of software (intelligent) agents to facilitate
intermediation

hypermediation
Extensive use of both human and electronic intermediation
to provide assistance in all phases of an e-commerce
venture
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Issues in E-Tailing
channel conflict
Situation in which an online marketing channel upsets the
traditional channels due to real or perceived damage from
competition
Determining the right price
Personalization
Fraud and illegal activities
How to make customers happy
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Managerial Issues
1. What should our strategic position be?
2. Are we financially viable?
3. Should we recruit out of town?
4. Are there international legal issues regarding
online recruiting?
5. Do we have ethics and privacy guidelines?
6. How will intermediaries act in cyberspace?
7. Should we set up alliances?

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Summary
1. The scope of e-tailing.
2. E-tailing business models.
3. How online travel/tourism services operate.
4. The online job market and its benefits.
5. The electronic real estate market.
6. Online trading of stocks and bonds.
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Summary
7. Cyberbanking and personal finance.
8. On-demand delivery service.
9. Delivery of digital products.
10. Aiding consumer purchase decisions.
11. Critical success factors.
12. Disintermediation and reintermediation.